TITLE 3. ALCOHOLIC BEVERAGE AND CANNABIS CONTROL

VIRGINIA ALCOHOLIC BEVERAGE CONTROL AUTHORITY

Proposed Regulation

Title of Regulation: 3VAC5-30. Tied-House (amending 3VAC5-30-10 through 3VAC5-30-90; adding 3VAC5-30-100).

Statutory Authority: §§ 4.1-103 and 4.1-111 of the Code of Virginia.

Public Hearing Information: No public hearing is currently scheduled.

Public Comment Deadline: October 11, 2024.

Agency Contact: LaTonya D. Hucks-Watkins, Senior Legal Counsel, Virginia Alcoholic Beverage Control Authority, 7450 Freight Way, Mechanicsville, VA 23116, telephone (804) 213-4698, FAX (804) 213-4574, or email latonya.hucks-watkins@virginiaabc.com.

Basis: Section 4.1-103 of the Code of Virginia provides that the Virginia Alcoholic Beverage Control Authority Board of Directors has the authority to adopt regulations and to do all acts necessary or advisable to carry out the purposes of Title 4.1 of the Code of Virginia. Section 4.1-111 of the Code of Virginia provides the board with the authority to adopt reasonable regulations that it deems necessary to carry out the provisions of Title 4.1 of the Code of Virginia and to amend or repeal such regulations.

Purpose: This regulation is essential to protect the health, safety, and welfare of citizens because the regulation provides guidance for regulants aimed at preventing violations of the Tied-House Laws, which often create unfair advantages in the alcohol industry at the expense of the consumer.

Substance: The proposed amendments (i) add new sections and requirements, (ii) revise fees, and (iii) remove duplicative or unnecessary provisions.

Issues: The primary advantage to the public is that the revisions move requirements that deal with Tied-House issues to this chapter devoted to Tied-House, making the requirements easier to find. The changes reorganize the chapter so that it reads more fluidly. The revisions bring clarity to the Virginia Alcoholic Beverage Control Authority rules regarding price discrimination for entities that have both on-premises and off-premises privileges. The benefit to the Commonwealth is that the regulation utilizes current terminology and also makes the requirements easier to explain. There are no disadvantages to the public or Commonwealth.

Department of Planning and Budget's Economic Impact Analysis:

The Department of Planning and Budget (DPB) has analyzed the economic impact of this proposed regulation in accordance with § 2.2-4007.04 of the Code of Virginia and Executive Order 19. The analysis presented represents DPB's best estimate of the potential economic impacts as of the date of this analysis.¹

Summary of the Proposed Amendments to Regulation. As part of a periodic review, the Virginia Alcoholic Beverage Control Board of Directors (board) proposes amendments to the regulation to align the regulation with current industry practices, conform to the Code of Virginia, improve clarity, and remove redundant and obsolete language.

Background. Section 4.1-111 B 3 of the Code of Virginia states that the board shall promulgate regulations that "maintain the reasonable separation of retailer interests from those of the manufacturers, bottlers, brokers, importers, and wholesalers" and "prevent undue competitive domination of any person by any other person engaged in the manufacture, distribution and sale at retail or wholesale of alcoholic beverages in the Commonwealth."² In addition, § 4.1-215 C of the Code of Virginia states that, "The General Assembly finds that it is necessary and proper to require a separation between manufacturing interests, wholesale interests, and retail interests in the production and distribution of alcoholic beverages in order to prevent suppliers from dominating local markets through vertical integration and to prevent excessive sales of alcoholic beverages caused by overly aggressive marketing techniques."³ Accordingly, Tied-House (3VAC5-30) addresses various details pertaining to business arrangements between manufacturers or wholesalers and retail establishments, including the rotation and exchange of retailer stocks by wholesalers, deposits for containers, recordkeeping requirements, routine business entertainment, the provision of advertising materials, and price discrimination.

In order to meet the regulatory reduction requirements of Executive Order 19, the board met six times between June and October 2022 to review all of the Virginia Alcoholic Beverage Control Authority regulations and convened roughly 60 stakeholders, representing all categories of license holders.⁴ Thus, the board seeks to make a number of changes that would update the regulation to reflect current practice, align the language with statute, and remove redundant or obsolete language. The most substantive changes are summarized as follows: Deposits on containers (3VAC5-30-40): This section currently specifies the minimum deposit fees that wholesalers must charge retailers for beer bottles, cases, kegs, and other equipment for use by customers. The Board proposes to remove the table of specific minimum deposit charges and instead specify that wholesalers (i) collect a deposit from retail licensees and (ii) charge the same deposit fee for all of their retailers. The board would retain text in this section requiring that invoices reflect the deposit charges and that the deposits be refunded upon return of the containers in good condition.

Routine business entertainment (3VAC5-30-70): The definition of "routine business entertainment" in this section only includes (i) meals and beverages; (ii) concerts, theater, and arts entertainment; (iii) sports participation and entertainment; (iv) entertainment at charitable events; (iv) private parties; and (vi) local transportation in order to attend one or more of the aforementioned activities. The board proposes to remove this definition to allow for other types of events and expenses. The authority indicated that the intent of the regulation is not to restrict the types of expenses, but rather the magnitude and frequency at which such expenses are incurred, thus the listing of individual activities is unnecessary. Accordingly, the board would retain the expense-related limits currently in the regulation. These include a spending cap of $400 in a 24-hour period, as well as the limitation that no person may be entertained more than six times in a year by a wholesaler and six times in a year by a manufacturer.

Price discrimination (3VAC5-30-90): This section prohibits wholesale wine or beer licensees from engaging in price discrimination (charging different prices to different retailers for the same product) except under certain circumstances. This section was modified in 2017 to allow wholesale wine licensees to charge different prices for the same product to retail purchasers. Specifically, retail purchasers with on-premises privileges could be charged different prices than retailers with off-premises privileges, provided all retailers within each category were charged the same price.⁵ Subsequently, the board issued a Guidance Document requiring certain documentation for retail licensees with dual privileges.⁶ The board seeks to include the provisions of that document in the regulation and to delete that Guidance Document once this action becomes effective.⁷ The proposed amendments would specify that (i) the wholesale price provided to a retailer with both privileges must depend on the type of sales from which the licensee obtains the majority of its business revenue, (ii) retailers with both privileges who choose to accept the price differentiations shall provide wholesalers with a written statement declaring which privilege generates the majority of their business revenue,⁸ (iii) wholesalers shall maintain these statements and indicate which privilege the retailer has designated on their sales invoices, and (iv) upon request, wholesalers and retailers shall provide the Board with written substantiation for any price differentiation.

In addition to these changes, the board also proposes to reorganize some of the provisions in 3VAC5-30-60 (Inducements to retailers), including moving some stipulations regarding advertising to 3VAC5-30-80 (Advertising materials that may be provided to retailers by manufacturers, importers, bottlers, or wholesalers) and deleting language redundant of statute, specifically subsection K, which contains a reference to statute that provides the penalties for violating that section of the regulation. Lastly, 3VAC5-30-80 (Advertising materials) would also be amended to add two provisions that would be moved from 3VAC5-20 (Advertising) and a new 3VAC5-30-100 (Novelties and specialties) would be created in this regulation, in which existing requirements would be moved verbatim from the Advertising regulation, 3VAC5-20.⁹

Estimated Benefits and Costs. The proposed amendments largely serve to update the regulation to reflect current practice, conform to statute, and remove redundant or obsolete language, and are therefore not expected to create significant costs. The changes pertaining to price discrimination by wine wholesalers could add new administrative costs for on-premises and off-premises licensees that choose to accept price differentiation and for the wine wholesalers, but only if they do not already follow the provisions of the guidance document. However, as mentioned previously, the authority reports that they enjoy widespread voluntary compliance with the guidance, and any new recordkeeping cost for a one-time declaration of which privilege generates greater revenue is likely negligible for on-premises and off-premises retail licensees.

Removing the minimum deposit amounts for beer containers and equipment for customer use (such as taps for kegs) from the regulation and specifying that all retailers be charged the same amount is unlikely to have any practical impact. The authority reports that stakeholders who were convened to review the regulation reported that they already charge higher deposit fees than the minimums specified in the regulation. Thus, removing the minimum charges would be unlikely to result in an increase in those fees by wholesalers. Although the authority does not collect information on the deposit amounts charged by beer wholesalers, and the regulation does not currently specify that wholesalers must charge all retailers the same deposit fees, the authority reports that in practice, participants in the industry communicate openly with each other, and retailers tend to learn if they are being charged a different deposit by the same wholesaler. Thus, adding the requirement that deposit fees be uniform across retailers would mainly serve to reflect current practice.

Removing the definition of "routine business entertainment" would provide wholesalers, manufacturers, importers, and brokers with greater flexibility for the type of entertainment they are able to provide to retail licensees. This would likely benefit them as well as the retail licensees who are the recipients of such business entertainment.

Lastly, the board proposal to delete 3VAC5 30-60 K entirely, instead of amending the language to reference the relevant Code of Virginia section, may make it more difficult for industry members and the public to find information on the penalties for noncompliance with the section.

Businesses and Other Entities Affected. The proposed amendments potentially affect the authority's approximate 20,892 licensees¹⁰ who manufacture, distribute, or sell and serve alcoholic beverages in the Commonwealth and other interested parties. Changes pertaining to price discrimination and minimum deposits would affect 524 beer and wine wholesaler licensees. There are 19,349 retail licensees in total; retail licensees with on-premises and off-premises privileges who choose to accept price differentiations from wine wholesalers may incur a small one-time administrative cost if they have not already provided a written declaration in accordance with the 2017 Guidance Document.

The Code of Virginia requires DPB to assess whether an adverse impact may result from the proposed regulation.¹¹ An adverse impact is indicated if there is any increase in net cost or reduction in net benefit for any entity, even if the benefits exceed the costs for all entities combined.¹² The proposed amendments do not appear to increase net costs or reduce benefit. Thus, no adverse impact is indicated.

Small Businesses¹³ Affected.¹⁴ The proposed amendments do not appear to adversely affect small businesses. Some of the retail licensees with on-and-off-premises privileges who choose to accept price differentiations from wine wholesalers may be small businesses and may incur a small one-time administrative cost if they have not already provided a written declaration in accordance with the 2017 Guidance Document.

Localities¹⁵ Affected.¹⁶ The proposed amendments neither disproportionally affect any particular localities nor affect costs for local governments.

Projected Impact on Employment. The proposed amendments do not appear to affect total employment.

Effects on the Use and Value of Private Property. The proposed amendments do not substantively affect the use and value of private property. The proposed amendments do not affect real estate development costs.

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¹Section 2.2-4007.04 of the Code of Virginia requires that such economic impact analyses determine the public benefits and costs of the proposed amendments. Further the analysis should include but not be limited to: (1) the projected number of businesses or other entities to whom the proposed regulatory action would apply, (2) the identity of any localities and types of businesses or other entities particularly affected, (3) the projected number of persons and employment positions to be affected, (4) the projected costs to affected businesses or entities to implement or comply with the regulation, and (5) the impact on the use and value of private property.

² See https://law.lis.virginia.gov/vacode/title4.1/chapter1/section4.1-111/.

³ See https://law.lis.virginia.gov/vacode/title4.1/chapter2/section4.1-215/.

⁴ See https://townhall.virginia.gov/L/Meetings.cfm?BoardID=2&time=Past. The authority provided a list of external stakeholders; although all stakeholders may not have attended every meeting, the meetings were spent conducting a line-by-line review of the regulations, and the proposed changes reflect board decisions after considering stakeholder input.

⁵ See https://townhall.virginia.gov/l/ViewAction.cfm?actionid=4660.

⁶ See https://townhall.virginia.gov/L/ViewGDoc.cfm?gdid=6207. The guidance was issued in response to complaints that retail licensees with on- and off-premises privileges were exploiting the new provision to purchase wine at the wholesale price for off-premises licensees, which is lower than the price for on-premises licensees, but sell it to customers for on-premises consumption, which allows for a higher markup.

⁷ Although the authority reports widespread voluntary compliance with the guidance, a licensee pointed out that the authority could not legally enforce the guidance document, prompting the board to make this change. In addition, as a result of 2020 license reform, all on-premises retail licensees now also have off-premises privileges; the on-premises retail license was effectively converted into the on-premises and off-premises retail license. (See Chapter 1113 of the 2020 Acts of Assembly.) ABC also reports that they can verify if a retailer is being honest with the wholesaler about which privilege generates the majority of its revenues based on record-keeping requirements contained in § 4.1-204 of the Code of Virginia and 3VAC5-70-90.

8 Choosing to accept price differentiations, as used here and in the regulation, applies to on-premises and off-premises retail licensees who choose to pay the off-premises price. the authority has clarified that on-premises and off-premises retail licensees who choose to pay the on-premises price would not be choosing a price differentiation and would not be subject to these recordkeeping requirements.

⁹ The board is concurrently amending 3VAC5-20 to remove these provisions so as not to be duplicative, and to make other changes and conduct a periodic review. See https://townhall.virginia.gov/ L/viewstage.cfm?stageid=10229 for proposed changes to that regulation.

¹⁰ Data Source: the authority.

¹¹ Pursuant to § 2.2-4007.04 D: In the event this economic impact analysis reveals that the proposed regulation would have an adverse economic impact on businesses or would impose a significant adverse economic impact on a locality, business, or entity particularly affected, the Department of Planning and Budget shall advise the Joint Commission on Administrative Rules, the House Committee on Appropriations, and the Senate Committee on Finance. Statute does not define "adverse impact," state whether only Virginia entities should be considered, nor indicate whether an adverse impact results from regulatory requirements mandated by legislation.

¹² Statute does not define "adverse impact," state whether only Virginia entities should be considered, nor indicate whether an adverse impact results from regulatory requirements mandated by legislation. As a result, DPB has adopted a definition of adverse impact that assesses changes in net costs and benefits for each affected Virginia entity that directly results from discretionary changes to the regulation.

¹³ Pursuant to § 2.2-4007.04, small business is defined as "a business entity, including its affiliates, that (i) is independently owned and operated and (ii) employs fewer than 500 full-time employees or has gross annual sales of less than $6 million."

¹⁴ If the proposed regulatory action may have an adverse effect on small businesses, § 2.2-4007.04 requires that such economic impact analyses include: (1) an identification and estimate of the number of small businesses subject to the proposed regulation, (2) the projected reporting, recordkeeping, and other administrative costs required for small businesses to comply with the proposed regulation, including the type of professional skills necessary for preparing required reports and other documents, (3) a statement of the probable effect of the proposed regulation on affected small businesses, and (4) a description of any less intrusive or less costly alternative methods of achieving the purpose of the proposed regulation. Additionally, pursuant to § 2.2-4007.1 of the Code of Virginia, if there is a finding that a proposed regulation may have an adverse impact on small business, the Joint Commission on Administrative Rules shall be notified.

¹⁵ "Locality" can refer to either local governments or the locations in the Commonwealth where the activities relevant to the regulatory change are most likely to occur.

¹⁶ Section 2.2-4007.04 defines "particularly affected" as bearing disproportionate material impact.

Agency Response to Economic Impact Analysis: The Virginia Alcoholic Beverage Control Authority concurs with the economic impact analysis prepared by the Department of Planning and Budget.

Summary:

The proposed amendments (i) align the regulation with current industry practices, (ii) conform the regulation to the Code of Virginia, (iii) improve clarity, and (iv) remove redundant and obsolete language.

3VAC5-30-10. Rotation and exchange of stocks of retailers by wholesalers; permitted and prohibited acts.

A. Permitted acts. Manufacturers, importers, bottlers, brokers, or wholesalers, or their representatives, may perform, except on Sundays in jurisdictions where local ordinances restrict Sunday sales of alcoholic beverages, the following services for a retailer upon consent, which may be a continuing consent, of the retailer:

1. Rotate, repack, and rearrange alcoholic beverages in a display (e.g., shelves, coolers, cold boxes, and the like, and floor displays in a sales area);

2. Restock alcoholic beverages;

3. Rotate, repack, rearrange, and add to his the retailer's own stocks of alcoholic beverages in a storeroom space assigned to him the individual by the retailer;

4. Transfer alcoholic beverages between storerooms, between displays, and between storerooms and displays; and

5. Create or build original displays using alcoholic beverages only.

B. Prohibited acts. A No manufacturer, importer, bottler, broker, or wholesaler, or its representative, may not:

1. Alter or disturb in any way the merchandise sold by another manufacturer, importer, bottler, broker, or wholesaler, whether in a display, sales area, or storeroom, except in the following cases:

a. When the products of one manufacturer, importer, bottler, broker, or wholesaler have been erroneously placed in the area previously assigned by the retailer to another manufacturer, importer, bottler, broker, or wholesaler; or

b. When a floor display area previously assigned by a retailer to one manufacturer, importer, bottler, broker, or wholesaler has been reassigned by the retailer to another manufacturer, importer, bottler, broker, or wholesaler;

2. Mark or affix retail prices to products other than those sold by the manufacturer, importer, bottler, broker, or wholesaler to the retailer; or

3. Sell or offer to sell alcoholic beverages to a retailer with the privilege of return, except for ordinary and usual commercial reasons as set forth below in this subdivision:

a. Products defective at the time of delivery may be replaced;

b. Products erroneously delivered may be replaced or money refunded;

c. Products of for which a manufacturer or importer discontinues production or importation may be returned and money refunded if no lawful exchange under subdivision 3 g of this subsection is available and if prior written approval is provided by the board Virginia Alcoholic Beverage Control Authority (authority);

d. Resalable draft beer may be returned and money refunded;

e. Products in the possession of a retail licensee whose license is terminated by operation of law, voluntary surrender, or order of the board authority may be returned and money refunded upon permit issued written approval by the board authority;

f. Products which that have been condemned and deemed a threat to public safety or are not permitted to be sold in this the Commonwealth may be replaced or money refunded upon permit issued written approval by the board authority; or

g. Alcoholic beverages may be exchanged on an identical quantity and brand basis for quality control purposes. Where production of the product has been discontinued, the distributor may exchange the product for a product from the same manufacturer on an identical quantity and comparable wholesale price basis. Any such exchange shall be documented by the word "exchange" on the proper invoice.

3VAC5-30-20. Restrictions upon employment; exceptions.

No retail licensee shall employ in any capacity in his at the licensed business any person engaged or employed in the manufacturing, bottling, or wholesaling of alcoholic beverages; nor shall any licensed manufacturer, bottler, or wholesaler employ in any capacity in his at the licensed business any person engaged or employed in the retailing of alcoholic beverages.

This section shall not apply to banquet licensees, farm winery licensees, or off-premises winery licensees, nor shall this section apply in any situation in which the manufacturer, bottler, or wholesaler does not sell or otherwise furnish, directly or indirectly, alcoholic beverages or other merchandise to the retailer.

3VAC5-30-30. Payment and recordkeeping requirements for certain transactions.

A. Sales of wine or beer between wholesale and retail licensees of the authority shall be for cash paid and collected at the time of or prior to delivery, except where payment is to be made by electronic fund funds transfer as provided in this section. Each invoice covering such a sale or any other sale shall be signed by the purchaser at the time of delivery and shall specify the manner of payment.

B. "Cash," as used in this section, shall include (i) legal tender of the United States, (ii) a money order issued by a duly licensed firm authorized to engage in such business in the Commonwealth, (iii) a valid check drawn upon a bank account in the name of the licensee or permittee or in the trade name of the licensee or permittee making the purchase, or (iv) an electronic fund funds transfer, initiated by a wholesaler pursuant to subsection D of this section, from a bank account in the name or trade name of the retail licensee making a purchase from a wholesaler or the authority.

C. If a check, money order, or electronic fund funds transfer is used, the following provisions apply:

1. If only alcoholic beverage merchandise is being sold, the amount of the checks, money orders, or electronic fund funds transfers shall be no larger than the purchase price of the alcoholic beverages; and

2. If nonalcoholic merchandise is also sold to the retailer, the check, money order, or electronic fund funds transfer may be in an amount no larger than the total purchase price of the alcoholic beverages and nonalcoholic beverage merchandise. If a separate invoice is used for the nonalcoholic merchandise, a copy of it shall be attached to the copies of the alcoholic beverage invoices that are retained in the records of the wholesaler and the retailer. If a single invoice is used for both the alcoholic beverages and nonalcoholic beverage merchandise, the alcoholic beverage items shall be separately identified and totaled.

D. If an electronic fund funds transfer is used for payment by a licensed retailer or a permittee for any purchase from a wholesaler or the authority, the following provisions shall apply:

1. Prior to an electronic fund funds transfer, the retail licensee shall enter into a written agreement with the wholesaler specifying the terms and conditions for an electronic fund funds transfer in payment for the delivery of wine or beer to that retail licensee. The electronic fund funds transfer shall be initiated by the wholesaler no later than one business day after delivery, and the wholesaler's account shall be credited by the retailer's bank no later than the following business day. The electronic fund funds transfer agreement shall incorporate the requirements of this subdivision, but this subdivision shall not preclude an agreement with more restrictive provisions. For purposes of this subdivision, the term "business day" shall mean a business day of the respective bank;

2. The wholesaler must generate an invoice covering the sale of wine or beer and shall specify that payment is to be made by electronic fund funds transfer. Each invoice must be signed by the purchaser at the time of delivery; and

3. Nothing in this subsection shall be construed to require that any licensee must accept payment by electronic fund funds transfer.

E. Wholesalers shall maintain on their licensed premises records of all invalid checks received from retail licensees for the payment of wine or beer, as well as any stop payment order, insufficient fund report, or any other incomplete electronic fund funds transfer reported by the retailer's bank in response to a wholesaler initiated wholesaler-initiated electronic fund funds transfer from the retailer's bank account. Further, wholesalers shall report to the Virginia Alcoholic Beverage Control Authority (authority) any invalid checks or incomplete electronic fund funds transfer reports received in payment of wine or beer when either (i) any such invalid check or incomplete electronic fund funds transfer is not satisfied by the retailer within seven days after notice of the invalid check or a report of the incomplete electronic fund funds transfer is received by the wholesaler, or (ii) the wholesaler has received, whether satisfied or not, either more than one such invalid check from any single retail licensee or received more than one incomplete electronic fund funds transfer report from the bank of any single retail licensee, or any combination of the two, within a period of 180 days. Such reports shall be upon a form provided by the authority and in accordance with the instructions set forth in such form.

F. Payments to the authority for the following items shall be for cash, as defined in subsection B of this section:

1. State license taxes and application fees;

2. Wine taxes and excise taxes on beer and wine coolers;

3. Solicitors' permit fees and temporary permit fees;

4. Registration and certification fees, and the markup or profit on cider, collected pursuant to these regulations this chapter;

5. Civil penalties or charges and costs imposed on licensees and permittees by the board authority; and

6. Forms provided to licensees and permittees at cost by the board authority.

Provided however, payments Payments to the authority may be made directly through the authority's licensing system software.

3VAC5-30-40. Deposits on containers required; records; redemption of deposits; exceptions.

A. Wholesalers shall collect a deposit in cash, at or prior to the time of delivery of any beer sold to a retail licensee, the following minimum deposit charges on containers: for bottles; cardboard, fiber, or composition cases; kegs; and tapping equipment, cooling tubs, and cold plates for use by consumers.

Bottles having a capacity of not more than 12 oz	$.02
Bottles having a capacity of more than 12 oz. but not more than 32 oz	$.04
Cardboard, fibre or composition cases other than for 1 1/8 -or 2 1/4-gallon kegs	$.02
Cardboard, fibre or composition cases for 1 1/8- or 2 1/4-gallon kegs	$.50
Kegs, 1 1/8-gallon	$1.75
Kegs, 2 1/4-gallon	$3.50
Kegs, 1/4-barrel	$4.00
Kegs, 1/2-barrel	$6.00
Keg covers, 1/4-barrel	$4.00
Keg covers, 1/2-barrel	$6.00
Tapping equipment for use by consumers	$10.00
Cooling tubs for use by consumers	$5.00
Cold plates for use by consumers	$15.00

Wholesalers shall charge the same deposit fee for all of the wholesaler's retailers.

B. The sales ticket or invoice shall reflect the deposit charge and shall be preserved as a part of the licensee's records.

C. Deposits shall be refunded upon the return of containers in good condition.

D. Deposits shall not be required on containers sold as nonreturnable items.

3VAC5-30-50. Solicitation of licensees by wine and beer solicitor salesmen salespersons or representatives.

A. A permit is not required to solicit or promote wine or beer to wholesale or retail licensees, including mixed beverage licensees, by a wine or beer solicitor salesman salesperson who represents any winery, brewery, wholesaler, or importer licensed in this the Commonwealth engaged in the sale of wine and beer. Further, a permit is not required to sell (, which shall include the solicitation or receipt of orders), wine or beer to wholesale or retail licensees, including mixed beverage licensees, by a wine or beer solicitor salesman salesperson who represents any winery, brewery, or wholesaler licensed in this the Commonwealth engaged in the sale of wine and beer.

B. A permit is required to solicit or promote wine or beer to wholesale or retail licensees, including mixed beverage licensees, by a wine or beer solicitor salesman salesperson or representative of any out-of-state wholesaler engaged in the sale of wine or beer. A permit under this section shall not authorize the sale of wine by the permittee, the direct solicitation or receipt of orders for wine, or the negotiation of any contract or contract terms for the sale of wine unless such sale, receipt, or negotiations are conducted in the presence of a licensed Virginia wholesaler or importer or such Virginia wholesaler's or importer's solicitor salesman salesperson or representative. In order to obtain a permit, a person shall:

1. Register Shall register with the board Virginia Alcoholic Beverage Control Authority (authority) by filing an application on such forms as prescribed by the board authority; and

2. Be Shall be 18 years old of age or older to solicit or promote the sale of wine or beer, and; may not be employed at the same time by an out-of-state wholesaler engaged in the sale of wine or beer and by a licensee to solicit the sale of or sell wine or beer,; and shall not be in violation of 3VAC5-30-20.

C. Each permit shall expire yearly on June 30 unless sooner suspended or revoked by the board authority.

D. Solicitation and promotion under this regulation chapter may include educational programs regarding wine or beer for mixed beverage licensees, but shall not include the promotion of, or educational programs related to, spirits or the use thereof of spirits in mixed drinks unless a spirits solicitor's permit has been obtained in addition to a solicitor's permit.

E. For the purposes of this regulation chapter, the soliciting or promoting of wine or beer shall be distinguished from the sale of such products, the direct solicitation, or receipt of orders for alcoholic beverages or the negotiation of any contract or contract terms for the sale of alcoholic beverages. This regulation chapter shall not be deemed to regulate the representative of a manufacturer, importer, or wholesaler from merely calling on retail licensees to check on market conditions, the freshness of products on the shelf or in stock, the percentage or nature of display space, or the collection of similar information where solicitation or product promotion is not involved.

3VAC5-30-60. Inducements to retailers; beer and wine alcohol tapping equipment; bottle or can openers; spirits back-bar pedestals; banquet licensees; paper, cardboard or plastic advertising materials; clip-ons and table tents; sanctions and penalties.

A. Any manufacturer, importer, bottler, broker, or wholesaler, of alcoholic beverages or its representative, may sell, rent, lend, buy for, or give to any retailer, without regard to the value thereof, the following:

1. Draft beer or wine Alcoholic beverage knobs, containing advertising matter, which shall include the brand name and may further include only trademarks, housemarks, and slogans and shall not include any illuminating devices or be otherwise adorned with mechanical devices which that are not essential in the dispensing of draft beer or wine; and

2. Clip-ons and table tents; and

3. Tapping equipment, defined as all the parts of the mechanical system required for dispensing draft beer in a normal manner from the carbon dioxide gas pressure tank through the beer faucet, excluding the following:

a. The carbonic acid gas in containers, except that such gas may be sold only at the reasonable open market price in the locality where sold;

b. Gas pressure gauges (, which may be sold at cost);

c. Draft arms or standards;

d. Draft boxes;

e. Refrigeration equipment or components thereof; and

f. Carbon dioxide filters, which may be provided and installed without cost.

Further, a manufacturer, bottler, or wholesaler may sell, rent, or lend to any retailer, for use only by a purchaser of draft beer in kegs or barrels from such retailer, whatever tapping equipment may be necessary for the purchaser to extract such draft beer from its container.

B. Any manufacturer, importer, bottler, broker, or wholesaler, or their representatives, representative may sell to any retailer and install in the any retailer's establishment dispensing accessories (, such as standards, faucets, rods, vents, taps, tap standards, hoses, cold plates, washers, couplings, gas gauges, vent tongues, shanks, and check valves), and carbon dioxide (and other gases used in dispensing equipment) at a price not less than the cost of the industry member who initially purchased them, and if the price is collected within 30 days of the date of sale. Manufacturers, importers, bottlers, brokers, or wholesalers of alcoholic beverages or the representatives of such manufacturers, importers, bottlers, brokers, or wholesalers may clean and service, either for free or for compensation, coils and other similar equipment used in dispensing alcoholic beverages and may sell solutions or compounds for cleaning alcoholic beverage glasses, provided the reasonable open market price is charged.

C. Any beer tapping equipment may be converted for wine tapping by the beer wholesaler who originally placed the equipment on the premises of the retail licensee, provided that such beer wholesaler is also a wine wholesaler licensee. Moreover, at the time such equipment is converted for wine tapping, it shall be sold, or have previously been sold, to the retail licensee at a price not less than the initial purchase price paid by such wholesaler.

D. Any manufacturer, bottler, or wholesaler of wine or beer alcoholic beverages may sell or give to any retailer, bottle or can openers upon which advertising matter regarding alcoholic beverages may appear is displayed, provided the wholesale value of any such openers given to a retailer by any individual manufacturer, bottler or wholesaler does not exceed $20. Openers in excess of $20 in wholesale value may be sold, provided the reasonable open market price is charged therefor.

E. Any manufacturer of spirits may sell, lend, buy for, or give to any retail licensee, without regard to the value thereof, back-bar pedestals to be used on the retail premises and upon which advertising matter regarding spirits may appear.

F. Manufacturers of alcoholic beverages and their authorized vendors or wholesalers of wine or beer may sell at the reasonable wholesale price to banquet licensees glasses or paper or plastic cups upon which advertising matter regarding alcoholic beverages may appear.

G. Manufacturers, importers, bottlers, brokers, or wholesalers of alcoholic beverages, or their representatives, may not provide point-of-sale advertising for any alcoholic beverage or any nonalcoholic beer or nonalcoholic wine to retail licensees except in accordance with 3VAC5-30-80. Manufacturers, importers, bottlers, brokers, and wholesalers, or their representatives, may provide advertising materials to any retail licensee that have been customized for that retail licensee (including the name, logo, address, and website of the retail licensee) provided that such advertising materials must:

1. Comply with all other applicable regulations of the board;

2. Be for interior use only;

3. Contain references to the alcoholic beverage products or brands offered for sale by the manufacturer, bottler, or wholesaler providing such materials and to no other products; and

4. Be made available to all retail licensees.

H. Any manufacturer, importer, bottler, broker, or wholesaler of wine, beer, or spirits, or its representatives, may sell, lend, buy for, or give to any retail licensee clip-ons and table tents.

I. Any manufacturer, importer, bottler, broker, or wholesaler of alcoholic beverages, or their representatives, may clean and service, either free or for compensation, coils and other like equipment used in dispensing alcoholic beverages, and may sell solutions or compounds for cleaning alcoholic beverage glasses, provided the reasonable open market price is charged.

J. F. Any manufacturer, importer, bottler, or wholesaler of alcoholic beverages licensed in this the Commonwealth may sell ice to retail licensees, provided the reasonable open market price is charged.

K. Any licensee of the board, including any manufacturer, bottler, importer, broker as defined in § 4.1-216 A of the Code of Virginia, wholesaler, or retailer who violates, attempts to violate, solicits any person to violate or consents to any violation of this section shall be subject to the sanctions and penalties as provided in § 4.1-328 of the Code of Virginia.

3VAC5-30-70. Routine business entertainment; definition; permitted activities; conditions.

A. Nothing in this chapter shall prohibit a wholesaler, manufacturer, importer, or broker of alcoholic beverages licensed in the Commonwealth from providing a retail licensee "routine business entertainment" which is defined as those activities enumerated in subsection B of this section.

B. Permitted activities are:

1. Meals and beverages;

2. Concerts, theatre and arts entertainment;

3. Sports participation and entertainment;

4. Entertainment at charitable events;

5. Private parties; and

6. Local transportation in order to attend one or more of the activities permitted by this subsection.

C. B. The following conditions apply:

1. Such routine business entertainment shall be provided without a corresponding obligation on the part of the retail licensee to purchase alcoholic beverages or to provide any other benefit to such wholesaler or manufacturer or to exclude from sale the products of any other wholesaler or manufacturer;

2. Wholesaler or manufacturer personnel shall accompany the personnel of the retail licensee during such business entertainment;

3. Except as is inherent in the definition of routine business entertainment as contained herein, nothing Nothing in this regulation chapter shall be construed to authorize the providing of property or any other thing of value to retail licensees;

4. No more than $400 may be spent per 24-hour period on any employee of any retail licensee, including a self-employed sole proprietor, or, if the licensee is a partnership, or on any partner or employee thereof of the partnership, or if the licensee is a corporation, on any corporate officer, director, shareholder of 10% or more of the stock, or other employee, such as a buyer. Expenditures attributable to the spouse of any such employee, partnership, or stockholder, and the like, shall not be included within the foregoing restrictions of this subdivision;

5. No person enumerated in subdivision 4 of this subsection may be entertained more than six times by a wholesaler and six times by a manufacturer per calendar year;

6. Wholesale licensees and manufacturers shall keep complete and accurate records for a period of three years of all expenses incurred in the entertainment of retail licensees. These records shall indicate the date and amount of each expenditure, the type of entertainment activity, and the retail licensee entertained; and

7. This section shall not apply to personal friends of manufacturers, importers, bottlers, brokers, or wholesalers as provided for in 3VAC5-70-100.

3VAC5-30-80. Advertising materials that may be provided to retailers by manufacturers, importers, bottlers, or wholesalers.

A. There shall be no cooperative advertising as between a producer, manufacturer, bottler, importer, or wholesaler and a retailer of alcoholic beverages, except as may be authorized by regulation pursuant to § 4.1-216 of the Code of Virginia. The term "cooperative advertising" shall mean the payment or credit, directly or indirectly, by any manufacturer, bottler, importer, or wholesaler, whether licensed in this the Commonwealth or not, to a retailer for all or any portion of advertising done by the retailer.

B. Manufacturers or their authorized vendors as defined in § 4.1-216.1 of the Code of Virginia and wholesalers of alcoholic beverages may sell, lend, buy for, or give to retailers any nonilluminated advertising materials made of paper, cardboard, canvas, rubber, foam, or plastic, provided the advertising materials have a wholesale value of $40 or less per item. Advertising material referring to any brand or manufacturer of spirits may only be provided to mixed beverage licensees and may not be provided by beer and wine wholesalers, or their employees, unless they hold those wholesalers or their employees hold a spirits solicitor's permit.

C. Manufacturers, bottlers, or wholesalers may supply to retailers napkins, placemats, and coasters that contain (i) a reference to the name of a brand of nonalcoholic beer or nonalcoholic wine, or (ii) a message relating solely to and promoting moderation and responsible drinking, which message may contain the name, logo, and address of the sponsoring manufacturer, bottler, or wholesaler, provided such recognition is subordinate to the message.

D. Any manufacturer, including any vendor authorized by any such manufacturer, whether or not licensed in the Commonwealth, may sell service items bearing alcoholic brand references to on-premises retail licensees. Such retail licensee may display the service items on the premises of his the licensed establishment. Each such retail licensee purchasing such service items shall retain a copy of the evidence of his the payment to the manufacturer or authorized vendor for a period of not less than two years from the date of each sale of the service items. As used in this subdivision, "service items" means articles of tangible personal property normally used by the employees of on-premises licensees to serve alcoholic beverages to customers, including, but not limited to, glasses, napkins, buckets, and coasters.

E. Alcoholic beverage "neckers," recipe booklets, brochures relating to the alcoholic beverage manufacturing process, vineyard, brewery, and distillery geography, and or history of an alcoholic beverage manufacturing area, and point-of-sale entry blanks relating to contests and sweepstakes may be provided by manufacturers, importers, bottlers, brokers, or wholesalers to retail licensees for use on retail premises, if such items are offered to all retail licensees equally, and the manufacturer, importer, bottler, broker, or wholesaler has obtained the consent, which may be a continuing consent, of each retailer or his the retailer's representative. Wholesale licensees in the Commonwealth may not put entry blanks on the package. Solicitors holding permits under the provisions of 3VAC5-60-80 may provide point-of-sale entry blanks relating to contests and sweepstakes to mixed beverage licensees for use on the premises if such items are offered to all mixed beverage licensees equally, and the solicitor has obtained the consent, which may be a continuous consent, of each mixed beverage licensee or his the licensee's representative.

F. Manufacturers, importers, bottlers, brokers, or wholesalers, or their representatives, may supply refund coupons if they the coupons are supplied, displayed, and used in accordance with 3VAC5-20-90.

G. No manufacturer, bottler, wholesaler, or importer of alcoholic beverages, whether licensed in this the Commonwealth or not, may directly or indirectly sell, rent, lend, buy for, or give to any retailer any advertising materials, decorations, or furnishings under any circumstances otherwise prohibited by law, nor may any retailer induce, attempt to induce, or consent to any such supplier of alcoholic beverages furnishing such retailer any such advertising.

H. Any advertising materials provided for herein, which in this section that may have been obtained by any retail licensee from any manufacturer, bottler, broker, importer, or wholesaler of alcoholic beverages, may be installed in the interior of the licensed establishment by any such industry member or their the industry member's representatives using any normal and customary installation materials. With the consent of the retail licensee, which consent may be a continuing consent, manufacturers, importers, bottlers, brokers, or wholesalers, or their representatives, may mark or affix retail prices on these materials.

I. Every retail licensee who obtains any point-of-sale advertising shall keep a complete, accurate, and separate record of all such material obtained. Such records shall show (i) the name and address of the person from whom the material was obtained; (ii) the date furnished; (iii) the item furnished; and (iv) the price charged therefore. All such records, invoices, and accounts shall be kept by each such licensee at the place designated in the license for a period of two years and shall be available for inspection and copying by any member of the board or its the board's special agents during reasonable hours.

J. No alcoholic beverage manufacturer, importer, or wholesale licensee may sell, rent, lend, buy for, or give to any retail licensee any outdoor alcoholic beverage advertising, any billboard placements for such advertising, or in any other way confer on any retail licensee anything of value that constitutes outdoor alcoholic beverage advertising.

K. No alcoholic beverage manufacturer, importer, or wholesale licensee may engage in cooperative advertising, as defined in this section, on behalf of any retail licensee.

L. Manufacturers of alcoholic beverages and manufacturer-authorized vendors or wholesalers of wine or beer may sell at the reasonable wholesale price to banquet licensees glasses or paper or plastic cups upon which advertising matter regarding alcoholic beverages may appear.

M. No manufacturer, importer, bottler, broker, or wholesaler of alcoholic beverages or representative of such manufacturer, importer, bottler, broker, or wholesaler may provide point-of-sale advertising for any alcoholic beverage or any nonalcoholic beer or nonalcoholic wine to retail licensees, except in accordance with this section. Manufacturers, importers, bottlers, brokers, and wholesalers or representatives of such manufacturers, importers, bottlers, brokers, or wholesalers may provide advertising materials to any retail licensee that have been customized for that retail licensee, including the name, logo, address, and website of the retail licensee, provided that such advertising materials must:

1. Comply with all other applicable regulations of the board;

2. Be for interior use only;

3. Contain references to the alcoholic beverage products or brands offered for sale by the manufacturer, bottler, or wholesaler providing such materials and to no other products; and

4. Be made available to all retail licensees.

3VAC5-30-90. Price discrimination; inducements.

A. No wholesale wine or beer licensee shall discriminate in price of alcoholic beverages between different retail purchasers, except where the difference in price charged by such wholesale licensee is due to:

1. Acceptance or rejection by a retail purchaser of terms or conditions affecting a price offer, including a quantity discount, as long as such terms or conditions are offered on an equal basis to all retailers;

2. A bona fide difference in the cost of sale or delivery; or

3. The wholesale licensee charging a lower price in good faith to meet an equally low price charged by a competing wholesale licensee on a brand and package of like grade and quality.

Where such difference in price charged to any such retail purchaser does occur, the board may ask for and the wholesale licensee shall furnish written substantiation for the price difference.

B. Notwithstanding subsection A of this section, wholesale wine licensees may differentiate in the pricing between retail purchasers with on-premises and off-premises privileges. However, there shall be no discrimination in pricing among retail licensee purchasers with on-premises privileges and no discrimination in pricing among retail licensee purchasers with off-premises privileges, unless the conditions in subsection A of this section are present. Price differentiations shall be subject to the following provisions:

1. The wholesale price provided for differentiation to a retailer with on-premises and off-premises privileges shall be based on which privilege generates the majority of the business revenue.

2. Licensees with on-premises and off-premises privileges who choose to accept price differentiations from wholesalers shall provide those wholesalers with a written statement declaring which privilege generates the majority of their business revenue.

3. Wholesalers will be responsible for maintaining those statements as well as indicating on sales invoices which privilege the retailer has designated as their major revenue generator.

4. Upon request, wholesalers and retailers shall provide the board with written substantiation for any price differentiation.

C. No person holding a license authorizing the sale of alcoholic beverages at retail shall knowingly induce or receive a discrimination in price prohibited by this section.

3VAC5-30-100. Novelties and specialties.

Distribution of novelty and specialty items, including wearing apparel bearing alcoholic beverage advertising, shall be subject to the following limitations and conditions:

1. Items not in excess of $10 in wholesale value may be given away. No manufacturer, importer, bottler, broker, wholesaler, or representative of such manufacturer, importer, bottler, broker, or wholesaler may give such items to patrons on the premises of retail licensees; however, a manufacturer or the manufacturer's authorized representative, other than wholesalers, conducting tastings pursuant to the provisions of § 4.1-201.1 of the Code of Virginia, may give no more than one such item to each consumer provided a sample of alcoholic beverages during the tasting event.

2. Items bearing moderation and responsible drinking messages may be displayed by the licensee and the licensee's employees on the licensed premises and given to patrons on such premises as long as any references to any alcoholic beverage manufacturer or the alcoholic beverage manufacturer's brands are subordinate in type size and quantity of text to such moderation message;

3. Items in excess of $10 in wholesale value may be donated by distilleries, wineries, and breweries only to participants or entrants in connection with the sponsorship of conservation and environmental programs, professional, semi-professional, or amateur athletic and sporting events subject to the limitations of 3VAC5-20-100, and for events of a charitable or cultural nature;

4. Items may be sold by mail upon request or over the counter at retail establishments customarily engaged in the sale of novelties and specialties, provided the items are sold at the reasonable open market price in the localities where sold;

5. Wearing apparel shall be in adult sizes;

6. Point-of-sale order blanks relating to novelty and specialty items may be provided by beer and wine wholesalers to retail licensees for use on the retail licensee's premises if done for all retail licensees equally and after obtaining the consent, which may be a continuing consent, of each retailer or the retailer's representative. Wholesalers may not be involved in the redemption process; and

7. Novelty and specialty items bearing alcoholic beverage advertising may not be distributed to persons younger than the legal drinking age.